A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.

The more widespread use of body cameras will make it easier for the American public to better understand how police officers do their jobs and under what circumstances they feel that it is necessary to resort to deadly force.

Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.

The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is not just a framework for utopia,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.

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Obama Refinance Plan Sows Seeds for Another Bailout

I’ve already mentioned how the rumored Obama plan to re-finance existing underwater Fannie/Freddie loans with new mortgages at as low as 4 percent would not actually do much, if anything, positive for the economy. Even worse is that such a plan would likely require a massive infusion of taxpayer dollars into Fannie Mae and Freddie Mac.

First let us start with some basics about the Fannie Mae business. According to Fannie’s most recent 10-Q (see page 28), Fannie’s current interest-earning assets, mostly mortgages, yield the company 4.59%. However, Fannie has to fund those assets. The cost of Fannie’s total current interest-bearing funding is 3.99%, leaving the company a spread of 60 basis points to cover its non-interest expenses. What should be immediately obvious is that lowering the value of much of Fannie’s book to 4% will leave the companies with almost zero earnings. I’m not sure how that is supposed to get Fannie back on the path to repaying the taxpayer.

Worse is that newly re-financed 4% mortgages, or mortgage-backed securities, would remain on Fannie’s balance sheet for years (assuming Fannie is still around). I cannot be the only one who believes rates are going up in the future – either due to inflation or the Fed raising rates to fight inflation. It is not hard to imagine, in say two years, Fannie stuck with a balance sheet of 4% assets, while having to pay 5% to fund those assets. It is also not hard to believe that the taxpayer would get stuck making up the difference. On a $3 trillion balance sheet, that’s $30 billion. Add in Freddie and you’ll get another $20 billion or so. And that’s at future funding costs of 5%. If Fannie’s funding costs hit 6% in the next few years, we could be looking at an annual shortfall of $100 billion.

Instead of helping dig Fannie and Freddie into a deeper hole, Obama should start offering a real plan to help repay the taxpayer for what they’ve already had to shell out for Fannie and Freddie.